June 28 (Bloomberg) -- Hong Kong Chief Executive-elect
Leung Chun-ying retained John Tsang as financial secretary in
his government, which takes office on July 1, as he seeks to
ensure a stable transition amid global economic uncertainty.

“In the coming years, our globalized economy will be
undoubtedly clouded by uncertainties and we in Hong Kong face
unprecedented challenges,” Tsang said at a press conference.
“I shall abide by the principle of prudent financial
management.”

Carrie Lam, currently in charge of land policy, will be
promoted to chief secretary, the second-highest position in
the city’s government. Anthony Cheung, a government adviser
who chairs a committee on subsidized homes, will take over
housing policy, according to a statement on the government
website.

Leung’s new government needs to provide more public
housing, as property prices soar, and alleviate poverty in a
city whose wealth gap is at the widest level in 40 years. The
new leader’s inauguration on the 15th anniversary of Hong
Kong’s handover to China may be marred by protests, with
activists threatening to take to the streets in a march
against government policies.

“C.Y. and Beijing need highly credible and experienced
officials to help boost the chief executive’s popularity,”
said Dixon Sing, a Hong Kong University of Science and
Technology political scientist. The appointments of Lam and
Tsang will ensure the city is in a position to deal with
unexpected crises, whether they are “economic or political,”
he said.

Key Issues

Tsang said he would focus on the key issues of housing
and land in his next term.

“I shall continue to refine our strategies on land
supply to help carry out the chief executive’s platform,” he
said. “I shall spare no effort to maintain a stable and
health property market.”

Tsang, 61, a bureaucrat for 30 years who took over as
financial secretary in 2007, presided over an 80 percent
increase in home prices during his term. He introduced a
special 15 percent tax on property transactions in November
2010 to curb speculation.

Hong Kong’s property prices rose this month to the
highest level since the previous peak in 1997, according to
data compiled by the Centaline Property Agency.

The current government said it will supply enough land to
build 30,000 private homes this fiscal year. About 75,000
public housing units are scheduled to be built in the next
five years.

Cash Handouts

Tsang gave away HK$62.2 billion ($8 billion) in cash
handouts of HK$6,000 to each Hong Kong resident last year in a
last-minute reversal on the government.

Hong Kong’s Gini coefficient, an income inequality
measure, gained to 0.537 in 2011, from 0.525 in 2001, the
Census and Statistics Department said last week. The gap is
wider than in Canada, the U.K., the U.S., Australia and
Singapore, the department said.

The city’s divide between rich and poor is at its worst
level since it was first recorded in 1971, when it was 0.43.

The Gini coefficient index ranges from zero to one, with
a reading of zero meaning income equality, and one indicating
complete inequality. Singapore’s coefficient rose to 0.482 in
2011 from 0.456 in 2001, according to the report.

Lam, 55, will become the second woman to hold the city’s
second most senior political appointment after Anson Chan, who
was chief secretary before and after the handover from Britain
in 1997.

Lam is at present in charge of the city’s land policy and
allowed the demolition of historic architecture in the city’s
prime waterfront location to make way for reclamation in 2007.

Revamp Blocked

Leung’s plan to revamp the government was blocked by
lawmakers this month when they voted down a proposal to fast-track approval of his proposed government reorganization. The
chief executive-elect had sought to increase the size of the
15-member cabinet by adding four ministers, including two
deputies to both the chief secretary and financial secretary.

“We will continue to try very hard to get the
reorganization proposal through the Legislative Council,
because the package in many respects reflects the
aspirations of the people,” Lam said at the press conference.
“Our utmost priority is to persuade the Legislative Council
and to work with members to get the package through.”

Lawmakers staged a filibuster in the city’s Legislative
Council to delay the reorganization plan, which would cost an
extra HK$63 million a year to implement. Leung said the new
government structure would be more efficient in tackling
social and economic problems.

Illegal Structures

Leung’s legitimacy has increasingly been called into
question, after it was revealed that there were at least five
illegal structures on his property, an issue that tarnished
the image of Henry Tang, his main rival in the election.
Tang’s popularity plummeted after illegal additions were found
at a property owned by his wife.

The Democratic Party plans to challenge Leung’s election
in court because he made misleading statements to the public,
party chairman Albert Ho said.

Cheung, 59, will be in charge of implementing Leung’s
campaign platform to increase land supply, build more public
accommodation and help middle-class families buy properties.

K.C. Chan was retained as secretary for financial
services and the treasury, Rimsky Yuen was appointed secretary
for justice and Wong Kam-sing was named secretary for the
environment.